Gold vaults to nearly $1,675 an ounce

In the Lead: “Stall Warning”

Precious metals dealings once again opened mixed in New York, with gold and silver still free from the effects of any profit-taking gravitational pull and with the noble metals exhibiting the opposite condition. Spot gold traded at $1,666.60 per ounce (a gain of $6.50) following an overnight vault to nearly $1,675.00 the ounce overseas. Casting aside the non-default of the US, and the maintenance of the AAA rating of the US by both Fitch’s and Moody’s, gold specs set out to do that which would have logically been the case in the event the worst had come to pass as a result of Washington’s debt wrangling circus.

A summary glance at the latest GMFS/Brady/Soc Gen Global Hedge Book Analysis reveals that the first quarter of 2011 was in fact the second quarter of net hedging by global mines. This followed an uninterrupted four-year period of net de-hedging; a process and a time that many a market observer recognizes as having added substantial dollar amounts to the current price tag attached to an ounce of gold. Less than 5 million ounces of the yellow metal remain on the total global hedge book as of the end of March. Food for intense thought and a critical market topic we have not held back from keeping you informed about.

The Financial Times Lex blog opines that – at this juncture – gold may go swiftly in either direction as the epic clash of opposing armies run towards each other on the market’s battlefield. However, the FT remarks, that the problem remains that of pinpointing a top correctly. If one indicator – that of the rise in so-called “dumb money” gold holdings – is close to being as accurate as professionals say it is, then we might have a problem on hand. Recent accumulation patterns in the iShares Gold Trust, for example, reveal a large surge in the number of accounts that own under 100 ounces of bullion. Such accounts have trebled in the past 12 months while fund-flavored large ones have “barely budged.”

Silver opened with an 11-cent gain at $40.96 on the bid-side and of course no one used the excuse that the metal climbed on account of expectations related to expanding economic conditions. It was not long however, before the white metal succumbed to the same pressure that brought about a 2.7% drop in palladium, and a 1.15% decline in copper this morning. It’s called economic gloominess coupled with a still decent opportunity to book hefty profits.

Platinum fell $17 to the $1,778.00 mark and palladium shed $21 to ease to the $804 level per ounce. US July vehicle sales reflected some growth but remained below expectations and first quarter sales levels as well. The difficulties for carmakers were partially attributed to the lingering effects of the Japanese quake back in March. Honda and Toyota sales dipped by more than 20% on the month while GM and Ford reported single-digit bump-ups in the amount of iron that moved off of US dealer lots.

In the background, the Dow appeared set to try to repair some of the sizeable damage that has been inflicted in recent sessions, the US dollar sank to the 74 mark on the trade-weighted index, and the Swiss Franc…halted its ascent and went into a tailspin in the wake of the Swiss National Bank’s de facto ‘intervention’ in the market by a cut in the three-month LIBOR (to effectively zero).

The US as well as the global economy appears set to stall if the latest readings from various parts of the planet continue to be part of a trend. Gauges of various economic conditions in the US, Europe, and China are lurching towards contraction precisely at the time when various governments have had to adopt stern austerity and spending cut measures in order to avert debt downgrades and/or defaults.